Upcoming CE Presentations (Arizona, Poland & Germany)

Our team will be presenting at the following locations this summer on North Korea: Executive Director Andray will be in Poland and will present at the KSGSC (Korean Studies Graduate Student Conference) in Warsaw in September, 2012.

The Social Role and Media Descriptions of the Arirang Mass Games and Superbowl

This study explores the social roles of the Superbowl and North Korea’s Arirang Mass Games, while analyzing English-language media coverage of those events. This essay finds that while embedded in different cultures and patterns of state/civil society relations, both serve to support dominant social values and are very much in harmony with the interests of the state. English language media, however, affirms the role of the Superbowl, while criticizing the role of the Mass Games.

Managing Director Geoffrey will be speaking on more practical topics at the following events:

Update on recent changes in North Korea's business environment and emerging trends GRS 2012 Summer Conference Tuscon, Arizona July 27-28

Workshop on generating innovative ideas for positive change in North Korea Melton Foundation Global Citizenship Celebration Jena, Germany August 21-25

For bios, please see Our Team.

KCNA Gives Updates on Rason

KCNA ran a story about Rason on Monday in both Korean and English. The story informs us that the paving of the Road to Rason, which was initially hoped to be completed before the onset of winter last year, is still not finished. It is now expected to be completed within 2012. Reports from visitors this spring have indicated that it is "almost done". One wonders if they plan to have a grand unveiling just before or during the 2nd (Annual?) Rason International Trade Exhibition, which runs from August 20th to the 23rd.

The report also mentions that progress is being made on a mixed use railway line from Rason to the border at the Tumen River. It also mentions that plans for the three-nation Tumen triangle tours (to borrow a Koryo Tours phrase) are proceeding apace and that the self-drive Rason tours "are popular". Following traditional DPRK style, specific numbers are lacking.

Perhaps most interestingly, in the original Korean report, the legal reforms of December 2011 (Juche 100 to some of us) as "amending entirely" the Rason Special Economic Zone. (The English version just says the law was "amended and supplemented".)

There are a number of important changes in the newest version of the legal code. Perhaps most importantly, there is clearer delineation of the responsibilities of the Rason People's Committee and the central government. Interestingly, there are now also provisions for telecommunications to be used 'freely' in the zone.

In fact, however, the legal changes made in in January 2010 were probably more significant, having cut out provincial governance and given local authorities more autonomy. Drawing attention to and praising the reforms from 7 months ago does associate the changes in Rason with Kim Jong Il's last days, however, thus implying they  are in accordance with his final wishes. Obviously, this confers legitimacy on the current development decisions being taken there.

Meanwhile, Asahi Shinbun recently reported that in January, Chinese businessmen living in North Korea established an association in Rason, saying "they wanted to serve as a bridge between the North Korean government and Chinese companies."

Unfortunately, fixed hyper-linking is tough in the revamped KCNA website. Just visit KCNA and search for 'Rason'.

Debt Deal Looks Like Set Deal*

Russia has decided that if North Korea’s Soviet-era debt is never going to be repayed, it might as well not stand in the way of better trade relations and geopolitical influence. Over the weekend, Russia’s finance ministry said it has agreed to write off 90% of North Korea’s debt of $11 billion. This is a huge sum, obviously, equivalent to 20-25% of North Korea's GDP, depending on which set of made-up statistics you like best. North Korea's previous attempts -and failures - to free itself from the burden of Cold War era debt are well documented, including asking Hungary to write off 10 million in debt two years ago and, more curiously, offering to pay part of a similar sized debt to the Czech Republic in Ginseng. The debt that Russia holds dwarves the amounts owed the other former Eastern-bloc states. As such, it represents a huge victory for the budding Kim Jong Un era.

Kim Jong Il's "fun trip" to Siberia last fall to meet President Medvedev was partly about political succession, but was also in no small part about debt, aid and economic co-operation. It was then that the debt restructuring was agreed upon and now looks set to be implemented.

The debt forgiveness maintains a fairly broad Russian policy in recent years to forgive debt in Asia and Africa in exchange for access to trade and investment deals. However, it also reflects a specific interest in peninsular affairs that Russia has not demonstrated since the fall of the Soviet Union.

Russia's re-emergence as an economic player on the Korean peninsula has already begun with its gradual investments in the Rason SEZ. As of late last year,the SEZ is connected via a shiny new rail line to Vladivostok. Russia has also leased a berth at Rason's ice-free port, which is envisioned as a link between the Russian Far East and markets in Japan, South Korea and beyond.

Russia is also interested in extracting North Korea's reserves of zinc, lead, and other non-ferrous metals. On top of that, there is also apparently a plan to lease 200,000 hectares of land to North Korea  in the Amur region. Finally, there is the Russia to South Korea gas pipeline, which still faces significant political hurdles, but comes a step closer to reality if North Korea's debt to Russia disappears.

Back in February, Russian Ambassador Valery Sukhinin told Bloomberg that “All these existing agreements are supported by the new leadership in North Korea" (mostly referring to the pipeline). Kim Jong Il's deal with Russia looks especially shrewd and well-timed, given his death just five months later. The harmony in interests looks set only to increase, as Kim Jong Il's successor appears increasingly focused on economic management issues, while Medvedev's successor/predecessor is interested in increasing Russia's influence in the Far East.

Maybe, for all of this, the DPRK will publicly acknowledge the Russian Federation as the USSR's legitimate successor. Carefully worded, of course.

*Apology for the rhyme.

An Indecent Proposal?

A curious rumor has popped up in Chinese media over the weekend - one which states that North Korea is promoting transnational marriages as a means to attract foreign investment. This financial site, for example, attributing the "Chinese News Net" (中国新闻网), says that for a fee of 300,000 yuan a foreign man can obtain a marriage license in Korea. With the dashing suitor then bonded to a family, he is then expected to make further investments. Failing to do so will result in a 1,000,000 fine.

So far, this difficult-to-believe story hasn't made a splash on the English-language web. Some of the more obvious search terms give results for mostly crappy translation-bot blogs and websites. The only 'reputable' site to carry the story is the illustrious Global Times, which cites a defector group, rather than any Chinese sources for the information. Writes the Global Times:

"The North Korea Intellectuals Solidarity (NKIS), a group of North Korean dissidents resident in South Korea, claimed that entrepreneurs who want to marry North Korean beauties need to pay a deposit of $47,130 to get permission from North Korean authorities, the report said."

The NKIS helpfully goes on offer that "the promotion of transnational marriages at a national level proves that the country is in urgent need of attracting foreign investment to cope with its economic downturn."

First, this story, while possible, seems highly implausible, given North Korea's official view of itself and the value of its homogeneity. It is often claimed that marriage between a North Korean and foreigner is actually illegal, though North Koreans I've asked have said otherwise. That, said the social pressure against such a move would be staggering. To now promote such unions for the good of the nation would not only be a dramatic policy shift, but would be highly contradictory.

Second, it will be interesting to see if this makes it over into English language media in the next couple days. It is after all the kind of thing outlets like the Daily Mail are keen to print.

This story doesn't have the inherent drama of the "Kim Jong Un is dead rumor" that gripped the world back in February, which originated on Weibo and came to dominate a news cycle. But if the "investment wives" story catches some buzz on the Chinese web and then gets picked up by Western outlets, it could be a signal that Chinese netizens are going to act as another - and separate - filter for how we get our North Korea "news".

Female Participation in North Korea's Business Sector

In our workshops in North Korea, we have interacted with a number of highly-educated female managers in state-owned enterprises as well as businesswomen who run their own enterprises. Many of them are both highly capable and excited about growing the businesses they own. They have come a long way, and some even have the opportunity to take their businesses overseas. Haedanghwa, a North Korean restaurant and food business in Beijing, has a female General Manager by the name of Han Myong Hui. The restaurant aims to “provide pollution -free raw materials and seasoning from Korea and ensure unchangeable taste based on the strict hygienic quality management system” which is not too bad a value proposition given the perpetual smog sitting over Beijing. During my first trip to North Korea I met a female university student who talked about how she wanted to go into business and show that females can be good business leaders. In fact, this the initial impetus for setting up Choson Exchange. Females play an important part in North Korea’s business sector, which we attribute to their greater labor mobility compared to male colleagues who have to stay in government-assigned positions. Unsurprisingly, service sectors tend to have a higher representation of female managers compared to industrial sectors.

However, at many levels they are still under-represented. We previously surveyed a North Korean who is familiar with North Korea’s business sector, and found that as we go up the organizational hierarchy, female participation rates fall to 10-15% at the General Manager and more senior levels, compared to 65% at the entry level (we believe they are over-represented here because of stagnant career progression).

Our initial hypothesis was that access to business training and international opportunities could go a long way towards leveling the playing field for female managers in North Korea. We found that at the University of National Economy, a key focal point for business training, only 20% of enrollees are female. Furthermore, only 5% of international business opportunities are given to females. Depending on our ability to fund-raise for such a program, we hope to be able to more actively target this segment in order to bridge the capacity gap.

A program that will ensure a more level playing field should focus on providing networking opportunities, business and leadership skills training, and opportunities for international business exposure.

Visa Free Rason Tourism for Chinese Citizens

Chinese tourists will have visa free access to the border regions linking Yanbian Autonomous Region, Rason Special Economic Zone and Russia, according to a report originating with Jilin Radio that surfaced in South Korean media today. The report doesn't give an date for implementation, but does state that the previous tourism agreement governing the border region (signed in 2010) will be streamlined.  It still takes 10 days for a Chinese traveler to get permission to visit Rason. This process will drop to 2-3 days.

If accurate, this could go a long way towards boosting tourism in the SEZ. After all, a Beijinger or Shanghaiian might well be more willing to spend the money to visit the region if they can get two countries in the same trip. At the risk of overgeneralizing, Asian tourists seem eager maximize passport stamps above all else on international tours. This desire could be effectively exploited if Rason and Russia's Primorsky Krai province coordinate their marketing.

Also, now that the road to Rason is paved, the ease with which Chinese gamblers can reach the Emperor Casino and Hotel greatly increases and arguably makes the destination seem more normal and therefore attractive. One wonders if the casino's fleet of crimson humvees, once needed to whisk high-rollers along the laborious dirt road from, will now be replaced by Mercedes or Lexuses. (Lexi?)

Last year, the SEZ experimented with self-drive tours for Chinese citizens, though there has yet to be any follow-up on it.

For westerner tourists thinking of visiting Rason, we recommend Krahun, a company that has had a presence in Rason for over a decade and know the region exceptionally well.

A Week of JVIC

Early last week, the Rason City Administration announced that their inaugural Rason International Trade Exhibition of 2011 was going to have a second incarnation this summer. The invitation has been helpfully uploaded on NKeconwatch. As with the video presentations last year, materials for the trade fair seem to be primarily in English, with Chinese as a distant second. This is indicative of a long term goal to have this trade fair (and Rason more generally) develop as something greater than just a two nation affair. Interestingly, The Rason Exhibition Corporation, founded specifically to organize the trade fair, only has advertised offices in two foreign countries: China and in Singapore. Meanwhile, Kim Yong Nam was on a trip to Indonesia, via Singapore. Kim had with him Ri Kwang Gun, chairman of the Joint Venture and Investment Commission and An Jong Su, minister of Light Industry. The Singapore portion was brief, but the Indonesia portion was largely focused on economic issues.

From the Jakarta Post, largely quoting Foreign Minister Marty Natalegawa:

“There was indeed sharpened focus on economy and trade during the meeting. Not only about investment itself, but there was also interest [on the part of] North Korea that Indonesia could share how to regulate or manage foreign investment in the country. We noted that North Korea’s attention was quite high on the topics related to economic development and investment,” Marty announced at the State Palace after the meeting.

“Talks on this issue were also raised during the meetings of North Korea’s ministerial-level officials with the Indonesian government before President Kim’s visit today,” the minister added.

There were, however, no concrete business agreements made.

Minister Marty described the discussions on investment as at the "exploration level". North Korea is no doubt keen to reestablish what was once a close relationship with Indonesia in the hope of striking large investment deals down the road. Indonesia, by the way, is sometimes lauded as an example of a "Reformist Autocracy" that has managed to avoid a resource curse.

Friday saw the Rodong Sinmun carry a story called "DPRK Official Outlines Investment Environment". Kim Il Sun, who is a section head of the JVIC gave a speech at the Koryo Hotel. Among other things, he said that to "keep apace with the developing world economy which is characterized by cooperation and exchange, the DPRK government has been paying due attention to the expansion of external economic cooperation based on the constant development of the foundations of the self-reliant socialist economy and making active efforts to create favorable environment for investment."

JVIC is the main organ though which FDI is regulated and managed. It is also involved in overseeing the Rason SEZ.

Kim also touted underground resources, saying "rich natural resources serve as a strong foundation that guarantees the development of the self-reliant economy."

We will be most interested to see if the Rason trade fair expands, if Indonesia and the DPRK strike and large deals in the coming months and if expanded trade and self-reliance are compatible. One thing is clear: JVIC seems increasingly in the news, taking a more visible role for both North Koreans and foreigners.

Kim Jong Un Speech 2.0

This week news of Kim Jong Un's second major speech was disseminated in North Korea and required not one, two, but three pictures to commemorate it. The speech was on land management, with that term being used to cover topics as diverse as forestry, agriculture, road construction, urban renewal and mining. There were a number of interesting things about this speech, but a couple in particular stood out as relevant to Choson Exchange.

In the English summary, this stands out:

"The Ministry of Land and Environmental Conservation and relevant institutions should conduct brisk joint study, academic exchange and information exchange with scientific research institutions of other countries and take part in international meetings and symposiums to introduce advanced science and technology, he added."

We've had conversations with our North Korean partners about conducting training sessions on land reform and taxation issues. It doesn't seem  unreasonable to hope that the interest we've perceived on this issue will be redoubled after what seems like an endorsement from the very top.

In the full Korean text posted on Rodong Sinmun, Kim Jong Un also takes some time to specifically address the issue of underground resources. As Geoffrey and I have argued over at The Diplomat, North Korea's vast, untapped resources could create a more marketized and internationalized economy, but serve to maintain existing social and political structures. (Though this is by no means certain.)

Kim begins addressing this crucial sector by saying "We must positively protect and conserve the country's underground resources". He is concerned that "right now, to earn a handful of pennies, the country's precious underground resources are being developed and exported abroad to the point of depletion, instead of taking a long-term view but looking just in front of their faces with a shortsighted perspective that doesn't show patriotism."

As such, the authorities will "strictly set up a system to stop the development of underground resources to depletion or the random or chaotic development of said resources."

This appears, when combined with his public chastisement of officials at an on-the-spot inspection this week, to be something of a warning shot.  Local officials who run things for personal gain will have to start worrying that pressure from the center may be coming to bear. Our workshop leaders have often emphasized rule-of-law issues as related to investment environment and it would be a welcome development to see more consistency across the investment sectors the DPRK wants to focus on.

There is, of course, much to be done. And while this is just a single speech, it is interesting to note that some of our points of focus are on Kim Jong Un's mind, at least.

Kim Yong Nam to Singapore and Indonesia

It was reported this week by KCNA that Kim Yong Nam, the President of the Supreme People's Assembly, is to visit Singapore and Indonesia "soon". Kim Yong Nam has been head of the SPA since 1998, tasked with handling diplomatic relations for the DPRK. But he was also recently elevated to the Presidium of the Politburo of the Workers' Party of Korea Central Committee, which probably gives him greater participation in economic decision-making as well. (Not to suggest he was an outsider before - but he is now more central than ever.)

He also visited Singapore in 1985, when he was foreign minister and again in 2007 and 2009.

Singapore is a top-ten trading partner for the DPRK - ranking varying according to whose guesswork you follow. In fact, a few months after Kim's last trip, a trade deal was signed between the two countries.

Singapore seems like the secondary concern on this trip, however, at least according to KCNA. In the short announcement on Monday, the news agency gave a paragraph on Kim going to Indonesia then a seperate paragraph, reading: "He will also visit Singapore."

Indonesia has had a "long-standing collaboration" with the DPRK, going back to the era of the non-aligned movement, whose members sought a degree of independence from the Cold War superpower rivalry. Sukarno and Kim Il Sung were not insignificant figures in that movement and had friendly personal relations: recall that it was Sukarno who gave Kim Il Sung the gift of a particular orchid he took a shine to during a state visit.

Trade between Indonesia and North Korea has dwindled since their non-aligned days and this trip is likely an attempt to reinvigorate economic ties. Indonesia's experience with restructuring its economy and managing its natural resources after the Asian Financial Crisis will likely also be of interest to Kim. One deal already struck is a media swap. Indonesia and North Korea will exchange television shows, photos, news and also plan to swap journalists at some point.

Kim received a delegation from Laos last week, while Korean People's Army's top brass we're preparing to visit Vientiane. They may have even flown down together. The two countries don't have much to offer each other in terms of investment, but both are very concerned with avoiding being overwhelmed by China's rise.

Perhaps, then, we're seeing a DPRK pivot towards Southeast Asia. ASEAN, after all, subscribes to a doctrine of non-interference in domestic political systems, which suits North Korea as it seeks to diversify its sources for foreign direct investment. Southeast Asia is the logical place to look, since South Korea is fraught with difficulties and Japan has taken itself out of the game.

Or, perhaps at the end of the day, he just wanted to fly Singapore Air instead of Garuda so has to change at Changi airport.

Choson Exchange Director Joins MIT as Research Affiliate

Choson Exchange’s Managing Director Geoffrey See will be joining MIT’s Center for International Studies as a Research Affiliate. In this capacity, he will focus on development issues in North Korea and will be combining knowledge generation with Choson Exchange’s active projects in North Korea. Choson Exchange previously introduced MIT’s OpenCourseWare in North Korea and look to continue bringing innovative approaches to education to North Korea. MIT’s Center for International Studies is a leading academic center for research on security-related issues, and Researcher Jim Walsh at the Center is a leading expert in the field, an active participant in Track II dialogues with North Korea, and is building a highly innovative and exciting team of scholars focusing on North Korea.

Geoffrey believes that “North Korea is a field where innovative ideas and research combined with on-the-ground involvement in the country can be a potent and effective mix. Being involved with MIT will allow Choson Exchange to fulfill our mission of innovating in North Korea by tapping the wealth of economic policy, entrepreneurship and pedagogical expertise at MIT, as well as allowing us to more strongly understand the links between economic development and security issues in North Korea.”